Want to bet on manufacturing sector? Analysts suggest buying these 7 stocks for solid returns
India is gradually progressing on the road to Industry through the government initiatives like the National Manufacturing Policy which aims to increase the share of manufacturing in GDP to 25 per cent by 2025 and the PLI scheme for manufacturing which was launched in 2022 to develop the core manufacturing sector at par with global manufacturing standards. Analysts on Dalal Street believe that the manufacturing sector is one of the lynchpins of the economy. As India is going to double its gross domestic product (GDP), the sector will play a vital role in growth expansion over the next 2-5 years. Therefore, it makes sense to scuttlebutt on the sector to identify big gainers.
A couple of manufacturing stocks from across the sectors have already delivered multibaggers return to investors during the past five years. Take this: chemical major Alkyl Amines Chemicals have soared 876 per cent since January 12, 2013. Some other players including Dixon Technologies (India), Roopa Industries, Divi’s Laboratories, Pidilite Industries and Escorts Kubota have also advanced between 150 per cent and 375 per cent during the same period.
Market watcher Narendra Solanki, Head Fundamental Research-Investment Services, Anand Rathi Shares & Stock Brokers said “Due to the Covid-19 pandemic, many global companies are considering reducing the dependence of their manufacturing activities on China. Many companies are no longer considering China as their first preferred location for setting up factories. Taking advantage of this situation, the Indian Government has taken policy initiatives to attract companies looking to shift their manufacturing base to India in the post-Covid-19 scenario.”
Solanki further added that global manufacturers have initiated talks with domestic firms to explore the possibility of shifting a part of their supply chains from China to India as they seek to diversify their operations geographically. This environment has certainly encouraged the global manufacturer to establish a supply chain network in India. Growing demand from end users and favourable policy and regulatory framework.
Stocks to buy
The government has made some progress in improving labour market efficiency through various programmes such as тАШSkilling IndiaтАЩ and тАШMake in IndiaтАЩ. “We have an extensive positive outlook on manufacturing spaces like the electronics manufacturing industry, where our preferred pick is Dixon Technologies (India),” said Solanki.
Analysts believe that the automobile industry also has the potential to provide a significant boost to the growth of IndiaтАЩs manufacturing sector due to its size and interlinkages with various sectors of the economy. If the Indian manufacturing sector has to grow at a healthy rate, it cannot happen without the growth of the automobile industry.
“India has a car ownership penetration of approximately 3 per cent in its population. While replacement purchases and additional purchases by this 3 per cent segment are welcome, sustained healthy growth can come only if more consumers from the 97 per cent segment who currently donтАЩt have a car make their first-time purchases. We are preferring NRB Bearings to have pioneered the manufacturing of needle roller bearings in India since 1965. More than 90 per cent of the vehicles on Indian roads are running on bearings manufactured by NRB,” Solanki added.
He also prefers a leading industrial gasses and engineering company Linde India Limited. The company is engaged in the manufacture of industrial and medical gasses and the construction of cryogenic and non-cryogenic air separation plants. “Linde India is all set to register good growth driven by increasing manufacturing activities from the downstream industry like steel and cement, new capacities coming on stream and synergies benefit from JV with Praxair India. The company also has a debt-free balance sheet and a good financial profile,” Solanki said.
Kranthi Bathini, Equity Strategist, WealthMills Securities said, “Government wants to make India as an alternative to China. The FDI policy, allowing other global companies to make manufacturing shops in India will give a further boost to Indian companies and the manufacturing sector. Even defence also emerging as a manufacturing sector in India. This is one sector which will give a boost in 2-5 years.”
For stock-specific investors, he suggested players like ABB, Siemens, ┬аGrindwell Norton, ┬аDixon Technologies and Amber Enterprises from the manufacturing space.
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